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What Trump's Booming Economy Means for Tuesday's Midterms

What Trump's Booming Economy Means for Tuesday's Midterms Read Transcript

- Welcome back.

Another big issue thatdrives voters to the polls

is the economy and jobs.

Andrew Root with RegentUniversity's School of Business

joins us now to talk aboutthis important voter issue.

Welcome, Andrew.

- Thank you, Mike, I appreciate it.

- Yeah, thanks for your time.

First of all, how strongis the economy, really,

and how much of that is acredit to President Trump?

- Great questions.

The economy is very strong by any measure:

unemployment, job growth, income growth,

productivity, any measureyou wanna look at right now,

the economy is strong.

Exceptions might be in housing,

where things are a little bit softer.

Most of that credit,

versus what we saw inthe prior eight years,

does need to go to the President.

The reason is, he has engaged

in regulatory reform and fiscal reform.

People know about the taxes,

but the regulatory side of the changes

have been very significant

to getting business productivity going

and really freeing upbusiness investments,

so the acceleration we'veseen and the growth rate,

and the state of the economy today,

really is attributablea lot to what's happened

in the last couple yearswith fiscal policy.

- What sways people morein an election year,

a good economy or a bad economy?

- I think it's clearly a bad economy.

People are much moreadverse to pain and loss

than they are to gains.

I think the economy had beengrowing into the 2016 election,

and yet there was stilla desire for change

that superseded what wasgoing on with the economy.

Right now, though, theeconomy is better than it was,

so it will somewhat motivating to people,

but it's not quite as motivating

as if the economy were actuallyin recession at this point.

- How long will this expansion last

until we could see,possibly, another recession?

- Yeah, that is an excellent question.

That is really up to the Federal Reserve.

What's been happeningin the last month or so,

is that the stock market,which is a leading indicator,

has been much more volatile.

The reason it's been much more volatile

is that people are concernedthat the Federal Reserve

will raise interest rates too far.

And for people who are getting a mortgage,

for people who haveCapital One or Discover

as their credit card provider,they realize that credit

has gotten tighter in the past month,

and that's gonna lead to a deceleration

in the economic growth rate coming

in the first quarter of '19.

That doesn't mean that wehave to go into recession.

The natural state of theUS economy is growth.

It grows much more often than it shrinks.

Having said that, if the Federal Reserve

does continue to raise interest rates

all the way through 2019as they have advertised,

then there's a reasonable chance

we would have a recessionthe second half of 2019.

If they become more data-dependent,

if they just follow what'shappening in the economy

and what they're reading with people,

then I think this expansioncan go on for a long time.

- Well, let's break thisdown in practical terms.

How has this stronger economy

affected the paychecks of people?

- Yeah, and that's reallywhere I think, probably,

from the perspective of the election,

that's the most salient issue.

Right now you've got incomegrowing 3.1% year over year.

That's the best resultfor individual paychecks

since the financial crisis in 2008,

so individuals are feeling more cash flow,

they're feeling more discretionary income

than they've felt in over a decade.

- Let's talk tariffs, now.

There's been talk that these new tariffs

by President Trump will hurt the nation.

What are your thoughts on the tariffs?

- Yeah, I think, in general tariffs

are akin to a tax increase

in that the cost has to getpassed through somewhere,

but there are benefits to tariffs.

In the early 1980s, PresidentReagan instituted quotas

for foreign automakersthat lead to what is now

a pretty robust manufacturing sector

for foreign automakers in the US.

So the long game in tariffs

can be a little bit more beneficial

and I think capital markets

give the President some leeway on that.

I think the uncertaintyin general, though,

is something that getspriced in capital markets,

so while we're in this period

of uncertainty and negotiation,

that is gonna cost a littlebit more to raise money,

that will cost a fewbasis points of growth

off the economic growth rate, but overall,

it's nothing nearly asimportant as what's going on

with the Federal Reserveand fiscal policy.

- Well, people at homewanna know if these tariffs

are going to help or hurt American jobs.

Can you talk about that?

- I think from the perspectiveof manufacturing jobs,

it probably helps, I think,

from the overall prospectiveof does it cost me more

to buy things that areimported from other countries.

Yes, it will.

At the margin, does that meana little bit more inflation,

a little higher interest rates, yes.

That's kinda something that'snot that tangible to people.

I think if you work in an industry

where you're absolutelybeing disadvantaged

because of unfair trade practices,

I think you probably feel like

what's being done rightnow is the right thing.

- Yeah, so, he talked aboutevening the playing field

as far as when it comes to trade,

so, in essence, this is himkeeping a campaign promise?

- Yeah, and I think theeasiest way to understand

how fair or unfair thecurrent trade system is

is all countries except for the US

wanted to stay the same,

so that should give you some indication

that actually, it is true that the US

has generally been more lenientwith its trading partners

in order to help those peoplebecome more thriving economies

and, ultimately, that helps the US.

At this point, these economies

don't really need our assistance,

and so leveling the playing field,

which is what the President would say,

is the right approach.

I think all that endsup happening in practice

is it gets a little lessuneven toward the US,

which, as dynamic as the US economy is,

is probably all that we need.

- Okay, alright, Andrew, thank you so much

for your time today.- Thank you.

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